The Changing Geographies of the Multinational Corporation.pdf
The Changing Geographies of the Multinational
Corporation 12/5/12 12:48 AM
MNCs connect different places in increasing complex international divisions
It is through MNCs organizational spaces that the more tangible and material
economic geographies of the global economy are organized.
Multinationals operate in more than one country but are geographically
embedded in particular places.
7.2 The Changing Geography of FDI
Traced to the 1960’s
FDI: a measure of international flows of investment within firms
The sotck of outward FDI from the period 1914- late 1970’s marks the
decline of the UK and the rise of the US.
US and the UK are the leading source countries for FDI.
Old International Division of Labour: investment in developing counties for
resource and raw material extraction
Now there are greater investment flows between developed countries à FDI
more linked to manufacturing plants (Western Europe)
7.3 Understanding the Emergence of the MNC
Setting up New Plant or Facilities
The acquisition of Existing Factories or Firms
7.3.1 Why do firms internationalize?
The ultimate aim of realizing surplus value or profit
Economies of scale
Outgrowing the initial restrictions of a place
“spatial fix” (Harvey)
market access (accounts for the largest share of FDI)
Due to protectionism, Asian companies shifted to setting up overseas plants.
7.3.1 The New International Division of Labour
Growing level of FDI linked to the search for cheaper labour à new
international division of labour Higher level decision making would remain in the advanced regions
Routine, production activities would be dispersed
‘a race to the bottom’
7.3.3 Variations in Internationalization
‘eclectic’ paradigm: there are not simple models of MNC development, but
rather a range of motives, related to ‘accidents of history’ and the particular
path dependencies of individual firms, explain why and when
MNCs are particularly evident in 3 types of industry:
High technology industries: pharmaceuticals, electronics
Large volume, medium technology industries: motor vehicles
Mass Consumer products: jeans, shirts
These industries require high levels of technology and resources, but
demand is highly variable
7.3.4 A ‘newer’ International Division of Labour and Changing Organizational
increasingly shifting strategy from setting up their own production facilities
in developing countries to subcontracting work out to locally based firms
Sunk Costs: the costs of investment that are not directly recoverable if a
firm were to pull out of a particular location